The Case for Breakthrough Innovation

Is Google able to do what Xerox PARC and DARPA have for "breakthrough" innovation? Image: jurvetson/Flickr

From the 1950s roughly through the 1980s, major corporate labs like Xerox PARC and Bell Labs, and government research centers like DARPA, were nearly synonymous with “American innovation.” Then in the 1990s, the primary locus of innovation shifted to VC-backed startups, university incubators, and accelerator programs.

In a recent post, Geoffrey Moore describes these two models as the “core” and the “edge”, respectively — and he lays out a nice framework proposing three fundamental ways for the corporate “core” to capitalize on innovation investments: Differentiation (create separation from your competitors); Neutralization (catch up to your differentiated competitors); and Optimization (be more efficient and cost-effective than your competitors).

This is an excellent framework — but ultimately short-sighted. It’s great for what we might term “incremental” innovation — i.e., for innovating within red oceans. Yet there’s a glaring gap around what I’ll call “breakthrough” innovation.

To understand why, let’s trace the evolution of corporate labs. Xerox PARC may have faded from its halcyon days in the 70s and 80s — BUT it still exists. Since 2002, PARC has been structured as a semi-autonomous Xerox subsidiary — rather than a division within the corporate parent. This is both significant and telling: Xerox has recognized it’s no longer sufficient to invent a great new technology – in parallel you must create a great new business model. This is what the success of VCs and startups has taught us over the past ~20 years.

Google has taken a similar approach as Xerox. Originally, Google structured innovation efforts primarily around “20% Time” for their engineers. Yet over the years, they’ve learned an inevitable lesson: bundling innovation into the main corporate structure significantly constrains blue-sky thinking. So, about three years ago, they launched Google X — an autonomous high-end incubator focusing on “moonshots” that combine breakthrough new technologies with breakthrough new business models.

Going back to Mr. Moore’s model, it’s possible to argue that the Xerox PARC and Google X are contained within the “differentiation” lever. But that’s missing the point — because “differentiation” implies you’re creating market separation from something that already exists. Yet … true breakthroughs have no direct antecedents. They create new markets — and new value — where none previously existed.

Far from splitting hairs, making the case for TRUE breakthrough innovation is one of the most crucial points of our generation. Harvard’s Clayton Christensen first wrote about “disruption” more than 15 years ago, in his now-classic book, The Innovator’s Dilemma. He correctly observed that understanding, preparing, and even causing disruption would become pivotal for 21st-Century corporations to succeed. Today, Xerox PARC and Google X are merely two of the most well-known examples of today’s enterprises struggling to learn the “breakthrough game” — so they can avoid irrelevance, bankruptcy, and oblivion.

If breakthrough innovation is crucial to the health of our companies, it’s even more critical for our economy. If America’s enterprises aim merely to win in red-ocean marketplaces — whether through differentiation, neutralization, or optimization — then as a country we are ceding the future to other, hungrier economies (China, India, Brazil, among others). It would be a tragedy indeed if we, as a country and an economy, proceeded to eat our own tail under the false premise of “innovation”.

I’m confident we can rekindle the ability to be bold and think big. Please help me make the case for breakthrough innovation and join us on our blog.